Closely linked to the current economic environment is the Eurozone debt crisis, which is high on the list of risks and remains a potential trigger for further uncertainty.
Our research is based on a survey of executives at over 65 insurance companies across the globe, who shared their insights and perspectives on the factors driving the industry over the next five years. The study identified the top 10 most important risks facing the industry, along with the opportunities insurers can capitalize on.
There are two notable new additions to the top 10 risks this year. One is the twin challenge of cyber-risk and data security, which has moved beyond the aim of simply keeping data secure to encompass new issues such as systems security and data collection. The other is acquisition and retention of talent. This is closely linked to the challenges of greater regulation, the increasing use of sophisticated modeling to calculate risk and capital requirements, and a new emphasis on customer reach.
“In their search for growth and revenue, insurers need to optimize capital and asset liability strategies, remain cost competitive, while not losing sight of their customers’ needs. Adapting to evolving market and regulatory change will be a challenge that requires employing new technologies and building flexibility into all aspects of our business,” says Shaun Crawford, Ernst & Young’s Global Insurance Sector Leader.
The top 10 risks identified by the research are:
- Macroeconomic trends: how to deal with ongoing slower growth
- Regulation: a broad set of new regulations are emerging as a major source of risk
- Eurozone debt crisis: factoring in the global consequences of the crisis
- Reputational risk: safeguarding your reputation
- Corporate governance failures: with regulatory change, stakeholders seek confidence in corporate governance
- Cyber-risk and data security: how to contain the growing threat
- Talent recruiting skills: acquisition and retention of talent challenges insurers
- Impact of tax and accounting changes:recent actions are closely tied to regulation risk
- Operational risk: quantification of risk on the organization
- Availability and cost of capital: a continuing concern and how to attract investors
As highlighted in our report, there are many opportunities for insurers to improve their business, enhance revenue and focus on the customer. Improved distribution and product development dominates our list of this year’s opportunities and is expected to remain high in the rankings by 2015. Paul Clark, Asia Pacific Insurance Leader, adds: “Today’s insurers are enabling advances in product development through new metrics and social media tools, promoting the advantages of insurance to a younger audience and better interacting with customers approaching retirement.”
Our latest survey reveals that top executives and companies have a very realistic image about the context in which they operate and the industry’s challenges. One key finding of our survey is that companies are now renewing customer focus to meet demand. As the tout the advantages of insurance to a new and younger audience, very present in social media, insurers are redesigning products for an aging population to interact better with customers approaching retirement.
Source: EY Business Pulse: Exploring dual perspectives on the top 10 risks and opportunities in 2013 and beyond
The full report, EY Business Pulse: Exploring dual perspectives on the top risks and opportunities for 2013 and beyond, can be accessed at www.ey.com/insurance.
